PUHCA Companies: Caught By Superfund

An analysis of holding company liability under federal Superfund and parallel state laws.

Environmental cleanup to meet federal and state requirements carries substantial costs that tend to rest disproportionately on public utilities. Looking back at their corporate history, a few utilities have discovered some unique tools to reduce this economic burden.

The federal Superfund and parallel state laws¹ authorize the government to issue site study and cleanup orders to private parties, government actions against private parties to recover public funds used in site studies and cleanup, and actions between private parties to recover (or at least share) the costs of studies and cleanup. Although there is no adequate tally of the total cost of these programs, the federal Environmental Protection Agency (EPA) reports that it spends about $1.3 billion yearly and estimates that it secured private party cleanups and payments worth $16 billion over the first 20 years of its program.

Public utilities are easy targets in this process. Being highly visible public citizens, they have a penchant for compliance with the laws. Their facilities, built to last, use solid construction techniques that should minimize environmental mishaps. But utilities are heavily exposed to federal and state Superfunds because these laws impose "no fault" liability for actions of the distant past that were totally acceptable, even state-of-the-art, when taken. Years or decades later, if environmental contamination (or even just threatened contamination) is found, this can trigger liability.